The T&T government is expected to receive just over $1 billion from the CAF-development bank of Latin America as it grapples with the economic fall out from the COVID-19 pandemic.
According to Gianpiero Leoncini, representative of CAF in T&T, the money will be divided into two areas of support:. one for assisting the country to deal with the hit to the national budget caused by weak oil and gas prices and the second to assist the Ministry of Health in its emergency response to the virus.
In an email response to questions from the Sunday Business Guardian, Leoncini said the US$50 million for support of the Health sector will be disbursed quickly because it is needed urgently.
“We are currently in the process of approving a US$50 million loan for the emergency response, which will contribute to strengthening the capacity of the health system to fight the epidemic. As these resources are drawn from a contingency line we created in 2014 to face pandemics and natural disasters in Latin America and the Caribbean, they provide an agile mechanism that facilitates a rapid disbursement.” Leoncini explained.
Finance Minister Colm Imbert had projected that based on current calculations, taking into consideration the oil and gas prices and COVID-19 fallout, the country is now expected to lose some $4 to $5 billion based on what was originally projected in the 2020 fiscal package.
“When you factor in Green Fund and Unemployment Levy you lose a billion,” he said. “This takes no account of the slowdown in business activity and the natural decline that would take place as a result of the precautions (of the virus).” The Finance Minister recently told a news conference to discuss the economy.
He reminded that last year the budget was formulated against the price of US$3.15 per MMBtu (million British thermal units) of natural gas but the actual price the Government is now receiving only US $1.70.
“A substantial drop in revenue,” Imbert said.
With regards to oil, Imbert said there was a natural decline from the country’s ageing fields. According to Finance Minister, oil production dipped from 80,000 to 55,000 barrels per day as of the month of March.
Imbert explained that the COVID-19 virus is proving to be a harsh double whammy for T&T.
“If I had to make my best estimate of what will happen, we will lose over $5 billion in revenue this year as a result of the oil price shock and the issues arising from the precautions taken from the virus,” Imbert said.
Leoncini said CAF had set aside US$2.5 billion to assist the region in its response to the COVID-19 pandemic and was in the process of approving US$100 million for T&T.
He explained that unlike the US$50 million for the health sector, this second tranch of money will go towards sustaining the economy.
“Furthermore, CAF has put forward a new US$2.5 billion facility for the region, specifically designed to cope with the economic and social impact of the pandemic. This is unrestricted budget support to finance anti-cyclic measures which are crucial to sustain the economy when many key economic activities are being disrupted.
“We expect to provide an additional US$ 100 million to T&T from this facility.” the Representative in T&T of CAF-development bank added.
He said to be effective in the current scenario CAF understood the need to act quickly.
In addition the beneficiaries of the loans, including T&T will not have to repay any of the money for six years as the bank gives countries some time to recover from the precipitous fall in economic activity caused by measures designed to limit the spread of the virus.
“So we are offering loans which can be disbursed almost immediately. We are also aware that countries will need time to recover, so the facility will give a six-year grace period to begin repayment,” Leoncini said.
CAF said it had a duty to assist its member countries and while it is providing funding in the form of loans there were many other instruments that are available to member states including free technical assistance.
“As a multilateral development institution, CAF—Development Bank of Latin America has the duty to assist its member countries in times of need. We have therefore proposed to our member countries a series of instruments to help them fight the pandemic and its economic and social effects, including non-reimbursable technical assistance, emergency loans for the health sector and anti-cyclic budgetary support.
“We are working in partnership and solidarity with the Government of T&T on these fronts,” the bank added.
Imbert has indicated that the government plans to finance the budgetary shortfall and the emergency spending measures through a mixture of borrowings, drawdowns from the Heritage and Stabilisation Fund and possible sale of assets.